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A Number of Publicly Traded fiRms Pay No Dividends Yet

question 51

Essay

A number of publicly traded firms pay no dividends yet investors are willing to buy shares in these firms.How is this possible? Does this violate our basic principle of share valuation? Explain.


Definitions:

Competitive Market

A market structure characterized by many buyers and sellers, free entry and exit, and a product for which every seller offers a similar product.

Entry Restrictions

Refers to barriers that limit the ability of new competitors to enter and compete in an industry or market.

Revenue Function

A financial formula used to calculate the total revenue generated by selling a particular quantity of goods or services.

Total Profits

The net income a company generates after paying all expenses, taxes, and costs, calculated by subtracting total costs from total revenues.

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